Antitrust Law Daily Wrap Up, PRIVACY NEWS: High court asked to consider whether Hobbs Act prevents review of FCC rule’s validity in suit seeking money damages, (Oct 21, 2013)

By Tobias J. Gillett, J.D., LL.M.

The owner of a publishing company has asked the U.S. Supreme Court to review a decision of the U.S. Court of Appeals in St. Louis holding that the Hobbs Act barred it from considering the validity of a Federal Communications Commission rule applying an opt-out notice requirement to solicited as well as unsolicited facsimile advertisements. The publishing company owner filed his petition for certiorari with the Court on October 17 (Walburg v. Nack, Dkt. 13-486).

The TCPA prohibits sending an unsolicited advertisement to a facsimile machine unless “the unsolicited advertisement contains a notice meeting” certain requirements. The TCPA also provides for a private right of action “based on a violation of this subsection or the regulations prescribed under this subsection.” The FCC’s regulation states that “[a] facsimile advertisement that is sent to a recipient that has provided prior express invitation or permission to the sender must include an opt-out notice.”

Michael Nack received a facsimile advertisement from Douglas Walburg, which Nack had consented to receive. Nonetheless, Nack filed suit against Walburg, asserting class action claims that Walburg’s failure to include the opt-out language mandated by the FCC regulations violated the TCPA. The district court rejected these claims, concluding that the FCC’s opt-out regulation applied only to unsolicited faxes, and hence did not apply in the present case.

The appeals court found that the plain language of the FCC’s regulation extended the opt-out notice requirement to solicited as well as unsolicited advertisements, and that it had to defer to the FCC’s interpretation of its own regulation unless the regulation was contrary to unambiguous statutory language or application of the regulation was arbitrary or capricious. Moreover, the appellate court found that under the Hobbs Act the courts of appeals have exclusive jurisdiction to determine the validity of FCC orders, but that a “party challenging an FCC regulation as ultra vires must first petition the agency itself and, if denied, appeal the agency’s disposition directly to the Court of Appeals.” Since Nack had filed a private action, and Walburg had not yet sought a stay of the litigation to pursue administrative remedies through the FCC, no administrative proceeding had yet been held in the present case. Therefore, the court found that it was precluded from holding the regulation invalid.

In his petition, Walburg contends that the Eighth Circuit’s decision conflicts with the Sixth Circuit’s decision in Leyse v. Clear Channel Broadcasting, Inc., 697 F.3d 360 (6th Cir. 2012), which purportedly “held that the Hobbs Act did not prohibit a party from challenging the validity of an FCC rule in the context of a TCPA action for monetary and injunctive relief.” The Sixth Circuit allegedly concluded that, since the Hobbs Act was limited to “proceeding[s] to enjoin, set aside, annul, or suspend” an order of the FCC, and since the “central object” of the proceeding was to seek damages and an injunction against a private party for violating the TCPA, rather than to enjoin or annul an FCC order, a challenge to the FCC rule could be maintained. The challenge would not invalidate the rule; rather, “it would merely determine whether one private litigant could obtain monetary and injunctive relief from another.” The petition argues that the Supreme Court should grant certiorari to resolve the split in authority between the Sixth Circuit’s decision and the Eighth Circuit’s determination “that the Hobbs Act applies even to suits in which a private party seeks money damages from another private party.”

The petition also contends that the administrative remedies that the Eighth Circuit believed Walburg must pursue before appealing to the Court of Appeals “appear[ed] to be illusory,” “effectively insulat[ing]” the out-out regulation from judicial review in the Eighth Circuit. The petition observes that “the Eighth Circuit’s refusal to review the FCC’s regulation raises serious constitutional concerns” over the due process implications of leaving a party without the ability to challenge the imposition of liability under the FCC’s rule. The petition contends that the Eighth Circuit’s decision “effectively turns every regulation into the unreviewable law of the land” following the expiration of the Hobbs Act’s 60-day window during which parties that participated in the administrative proceedings must challenge an agency rule. “That result simply cannot be reconciled with the most basic structure of our constitutional system; no rule should ever have the effect of forcing a court to apply a regulation that is unconstitutional or illegal,” the petition argues.

The petition presents the question “whether the Hobbs Act prohibits a defendant from raising the invalidity of an FCC regulation when that regulation forms the basis of a class action brought by a private party seeking crippling monetary damages.”

Attorneys: Matthew S. Hellman (Jenner & Block LLP) and T. Michael Ward (Brown & James, P.C.) for Douglas P. Walburg.

News: Privacy